Kenya to Absorb Ksh 4.5 Billion Arbitration Loss Over Failed Cross-Border Power Project

Nairobi, August 15, 2025 — A report presented to Parliament has laid bare a staggering financial setback for taxpayers—Ksh 4.5 billion is poised to be paid to a Spanish firm after a botched energy transmission deal that never delivered electricity.

The Deal Gone Sour

The Kenya Electricity Transmission Company (KETRACO) awarded a 2016 contract valued at over Ksh 2 billion to Inabensa (Spain) to build a 132 km, 400 kV double-circuit powerline from Lessos (Kenya) to Tororo (Uganda). The objective was to boost regional power trade and grid stability.

However, in April 2016, KETRACO terminated the contract citing non-performance. Inabensa disputed the termination and initiated arbitration in 2019. The arbitration decision, which was upheld by all levels of the Kenyan courts including the Supreme Court, awarded the firm Ksh 4.5 billion.

Parliament Demands Answers

Before the Public Investments Committee on Commercial Affairs & Energy, KETRACO Managing Director John Mativo attempted to explain the financial and operational fallout. He indicated persistent legal battles and delayed Treasury funding since 2020 have hampered project progress.

Committee members, led by Pokot South MP David Pkosing, expressed outrage that despite billions lost, the power line remains incomplete almost a decade after the deal collapsed. Pkosing questioned: “How do we justify billions paid yet no electricity flows?”

More Flaws Exposed

The committee also flagged irregularities in another power infrastructure— the Loiyangalani–Suswa transmission project. A 2021 audit uncovered:

• Payments to a contractor who later went bankrupt

• Procurement outside annual plans

• Ksh 1.5 billion in uncertified subcontractor work

• Ksh 26.2 million in materials bought without valuation reports

Despite these failures, Mativo defended the process, clarifying that due diligence was carried out and Treasury later approved a fresh procurement process. He noted some of the project components have since been operational.

Compensation Delays Add to Missteps

Another pressing issue raised was the compensation owed to landowners—Ksh 2.7 billion remains unpaid. KETRACO attributed this backlog to insufficient Treasury allocations, incomplete documentation, and county-level land disputes. He did note that as of June 2025, the backlog had been reduced to Ksh 1.47 billion.

Parliamentarians warned that continued delays in paying wayleave compensation could lead to lawsuits, escalating costs, and stalled projects.

Systemic Weaknesses in Oversight

The soaring cumulative liabilities—including Ksh 6.7 billion from pending court cases and contractor claims—pose a serious risk to KETRACO’s capacity to manage future power projects.

Summary Table

Key Issue	Details
Contractor & Project	Inabensa (Spain); Lessos–Tororo powerline (132 km, 400 kV)
Contract Termination	April 2016 — followed by arbitration in 2019
Financial Outcome	Arbitration awarded Ksh 4.5 billion; upheld by Kenyan courts
Additional Project Errors	Loiyangalani–Suswa project marred by procurement and payment irregularities
Wayleave Compensation	Ksh 2.7 billion unpaid (down to Ksh 1.47 billion as of June 2025)
Broader Liabilities	Ksh 6.7 billion in pending legal claims and contractor disputes

 

Why This Matters

This report highlights recurring gaps in contract management, financial oversight, and fiduciary accountability in state infrastructure projects. Taxpayers are forced to bear the brunt of legal missteps and procurement failures—often with little to show in terms of public benefit. The findings underscore the urgency for Parliament and national oversight bodies to strengthen governance, ensure contractors are held to account, and fast-track stalled projects.

Let me know if you’d like a deeper dive into the contractual terms, legal precedents, or sector-wide reform proposals.